Thursday, June 07, 2007

INVESTMENT "HONEY MOONS" BOOST RUSSIAN ECONOMIC BOOM

In early 2007, investment growth boomed in Russia, driving one of the largest economies on record-breaking economic growth. High margins and rising ruble contributed to the growth of fixed capital investment which rised 19,9 percent, slashing the 17,4 percent record set back in 2000. WB's much favorable forecast predicted continually strong economic growth. It seems that investors relied on the estimates as internal and external investments focused on domestic consumption and mostly resource sector. This year's growth forecast is estimated to exceed previous 8 percent rate while the officials forecast 7 percent growth rate. Six year's annual economic growth has averaged 6.2 percent. However, Russian economic performance is significantly backlashed by tight inflationary pressure which will probably hit 9-10 percent annually, partly resulted from the unflexible exchange rate of the local currency and from the structural aspect including price controls, widespread government-owned enterprises and heavy regulation. Consequently, the degree of the independence gained by the central bank is not pretty high as it remain weak in controlling the inflationary pressures.